It was
interesting to watch Vice President Joe Biden comment about bullet trains
and electric grid development on ABC's This Week with George
Stephanopoulos on Sunday, July 5th. Conservatives can accuse Joe Biden
of many things, but being dull is not one of them.

It always
puzzles me when, after writing an article, other articles on that topic
suddenly appear. For instance, my high
speed/bullet rail article appeared on the NewsWithViews.com
site on June 29th. Days later, several articles on the same subject appeared
in major newspapers. Then Vice President Biden commented on it. I wonder
if he read my article.

Too
often, I think, the polarization of conservative versus liberal/progressive
prevents us from appreciating when the other side supports something right.

I believe
Biden did the right thing when he admitted "We misread the economy."
I also believe he was right, when he pointed to the development of high
speed bullet trains as part of the solution to unemployment and sagging
state and local treasuries. It takes courage to make such an admission.
I think most
people appreciate it when politicians dare to tell the truth. If we want
to hear more of it, we need to tell them we appreciate it when it happens.
(I could say the Vice President so seldom faces truth squarely, it makes
the occasion especially warming. but, of course, I would never say such
a thing.)

From
my perspective as a former banker, there are two major ways in which the
Obama Administration is still misreading the economy. I see no hint of
change - no pun intended. Well, maybe a little.

First,
their behavior suggests they believe the economy is going to return to
one driven by consumer spending and credit. It may, but if it does it
will take many years. It is impossible to have an unemployment rate close
to 10 percent or more (and rising) and have consumer spending sufficiently
strong to drive the world's largest economy. It's a nice dream, but has
little to do with reality.

When
the real gross domestic product (goods and services, located in the U.S.,
produced from labor and property) decreases at an annual rate of 5.5 percent
in the first quarter of 2009, and decreased 6.3 percent during the final
quarter of 2008, people are not going to rush to Macy's or Bloomie's or
Nordie's - or even J.C. Penny's or Wal-Mart - to spend money. Those kinds
of decreases in GDP shout "job losses!" People don't spend or
go into debt when they are concerned about their source of income.

I believe
the biggest negative currently impacting the American economy is lost
trust. Americans no longer trust their government. That, in my opinion,
is the most under-estimated problem we have today!

Liberals
strongly support the non-productive at the cost of the productive. The
non-productive are a major portion of the liberal voter base and must
be supported… maintained. They don’t understand that when
taxes become too burdensome on the productive, lifestyle costs are cut.
It’s easier to cut consumer lifestyle than run like a rodent in
a metal exercise ring. When that happens, spending comes to a halt. The
GDP falters when sales tumble. Manufacturing tumbles when sales go down.
More jobs are lost. Add a still unstable real estate market and you see
the picture.

This
Administration places too little emphasis on and gives too few rewards
for productivity. In fact, in today's environment, to be rewarded by government
one must become a drain on society. Then, you get help with your mortgage,
your credit card, your car payment. You'll soon get free health care,
too. It won't be good, but it will be free - at least it will be free
for those who do not pay taxes into the system. It will be a terrible
burden for productive people who do pay taxes. And, consumer spending
and credit usage then decrease even more.

Why
do we mistrust government? Let me count the ways. It starts with traditional
banking regulations written after the Great Depression to protect Americans
from another economic holocaust. It continues onward in history to re-written
financial services regulations that benefit Goldman Sachs, et al. We need
Glass Steagall back. Commercial banks need to be commercial banks again.
Investment banks need to stay in their own ballpark and leave credit to
commercial bankers. The commercial banking industry needs to earn its
profits from credit, not from investing depositor money in derivatives
- or, anything else. The practice of creating fiat currency by making
bank loans - fractional reserve banking - needs to be stopped.

We need
to downsize the Federal Reserve, not give it more responsibility or make
it bigger. It’s a privately-owned organization. Bankers own a large
part of the Fed. The bigger the bank is, the bigger the ownership position.
The Fed is a vendor, selling its services to government. It is not owned
or controlled by the government! However, a good argument can be made
that precisely the reverse is true.

Thus,
those that are regulated (banks and brokers) will be overseen by the Fed
(owned by bankers and brokers) and, thus, bankers and brokers will be
regulating themselves. Boy! Does that sound like a convenient way to avoid
discovering the fraudulent behavior that caused the crisis? In fact, it
doesn't even sound like a good way to avoid another crisis!

We mistrust
government because most of us know that the "too big to fail"
banks should never have been allowed to get so big. We know that if people
had been doing their jobs, they would not have been allowed to get so
fat. "Too big" banks have become so complex it’s extremely
difficult to unwind the complexities. It's "too complex," not
"too big", that causes the problems. It isn't asset size. It's
the impossibility of figuring out what these behemoths do with their assets
and how they do it. That’s why they can’t fail.

If regulators
had been doing their jobs, this mess would have been caught long before
reaching crisis proportions. If ratings agencies knew how to do or had
been doing their jobs, derivatives leveraged by investment banks so many
times it makes one dizzy figuring out how they did it, would never have
been sold. Trillions of dollars of losses would have been avoided.

Those
who do not understand the importance of something as simple as the "uptick"
rule and did not oppose its demise don't know enough to regulate the financial
services industry. It may have been the SEC's responsibility, but the
Fed could have said "stop" any time.

It appears
that the Fed lost control of the currency and money supply several years
ago. If it cannot properly oversee traditional, defined responsibilities
- currency and money supply - why is the Fed's authority being expanded?
Most people - who don't know the first thing about banks other than that's
where you go to get a car loan, a checking account and a credit card -
realize this is not just bad, it's stupid. Everyone knows President Obama
isn't stupid - every newspaper in the world has told them so. Even Glenn
Beck says he’s brilliant.

Unreasoned,
illogical behavior motivates distrust.

People
are suddenly aware that Constitutional rights granted by our American
Republic - we are not a democracy - are being badly abused. These people
haven't thought about their Constitutional rights in years. They just
assumed they would always "be there." They are learning freedom
isn't free.

It is
true that most current economic problems were inherited by the Obama Administration.
However, his proffered solutions are not inherited. They represent the
administration making them. The recommended solutions belong solely to
this administration. And, large stimulus packages utilized to pay the
costs of illegal aliens and to reward the behavior of the willingly non-productive
do not motivate trust.

There
are some projects that return more to an economy than others. Projects
like high speed rail stimulate the economy, especially when no tax dollars
are used to develop it. Joe Biden was right about the bullet trains being
a priority. The question Vice President Biden didn't answer is whether
taxpayer dollars or private capital should fund the project.

It's
meaningful in more than a dollar sense. It's meaningful to consumers,
too. When private capital builds something, it goes where consumers who
will pay to use it are found. When government builds something, it goes
where government wants to go which may, or may not, be where it will receive
the greatest usage or support. That's a giant reason why government projects
so often fail.

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The
question is not: How can government spend money to create jobs (the effort
for which now appears it will require yet another stimulus package)? The
question is: What can government do to create an environment that motivates
private industry to invest dollars rebuilding America's infrastructure?

Until
Americans once again have reason to trust their government, the economy
is going nowhere.

Marilyn
Barnewall received her graduate degree in Banking from the University
of Colorado Graduate School of Business in 1978. She has authored seven
non-fiction books about banking, two are listed at Oxford and Cambridge
University libraries in Great Britain. Her current book, When
the Swan’s Neck Breaks, details the banking problems she foresaw
in 2006. Of the 24 predictions made in the book, 22 have happened. It
is fiction but readers refer to it as docu-fiction.

Barnewall was
named one of America's top 100 businesswomen in the book, What It Takes
(Dolphin/Doubleday; Gardenswartz and Roe) and was one of the founders
of the Committee of 200, the official organization of America's top 200
businesswomen. She can be found in Who's:Who in America (2005-08), Who's
Who of American Women (2006-08), Who's Who in Finance and Business (2006-08),
and Who's Who in the World (2008).

It always puzzles
me when, after writing an article, other articles on that topic suddenly
appear. For instance, my high speed/bullet rail article appeared on the
NewsWithViews site on June 29th. Days later...